Beware the Roller Coaster…!

Most businesses have to deal with the roller coaster, which isn’t as much fun as it sounds…!  In fact, one of the keys to long-term success is to make sure you’ve got the roller coaster under control (as much as possible).

What is the roller coaster?

The roller coaster is when your business goes through repeated stretches of being really busy, followed by stretches of not busy enough. An independent consultant is the easiest example – although it can happen to almost any business.  Picture our friend Joe Solution – a freelance technology consultant.  Joe takes on a big project for a client in July where they have some very aggressive deadlines.  Money’s not a problem, so Joe gets the green light to work as much as he needs to in order to make sure the project gets done by October.  For a couple of months, Joe bills out a huge amount of hours, he makes some great money, and he generally has everything looking good.

Then the project ends and Joe has been so busy doing the work that he hasn’t had any time to find his next gig.  He spends the next 4 weeks hunting for an opportunity, with no income.  Finally, some things line up and he lands something.  The odds are good that this one will be all-consuming as well and so the cycle starts all over again.

If Joe is good enough, or lucky enough, he’ll be able to manage to an average income that’s at or above what he needs.  But he’ll have cash flow issues along the way and if (or when) he runs into a dry stretch, it could really hurt him.

Most businesses aren’t going to see the extreme highs or lows that Joe has to deal with, but you will see a similar trend and if you don’t manage it, it will have devastating impacts on your business. With that in mind, here are 3 things you can do to help manage your own roller coaster experience.

 

Manage the Roller Coaster

One of the best things you can do to combat the roller coaster is to proactively recognize that it’s happening (or going to happen) and make sure you carve out enough time and resources for sales and marketing, even when things are crazy busy.  Find a way to consistently reach out to prospects – every single month and keep your pipeline full and the roller coaster turns into more of an extended climb.

If you’re good at this, you theoretically run the risk of ending up with too much business, but I have yet to meet a business owner who wouldn’t like to have that problem. There are a lot of creative things you can do to manage when you have too much of a good thing.

Are you currently consistently marketing and making sales call every single month, regardless of how busy you are?  If not, why not?

 

Minimize the Roller Coaster

The absolute best long-term counter to the roller coaster is to migrate a large chunk of your income to recurring revenue.  If your customers are paying you a set amount every single month and it’s not directly tied to projects – then you won’t have a roller coaster problem.  Unfortunately, this approach may be difficult to pull off in certain industries – but with some creativity, almost any business can find a way to generate at least some recurring revenue.

Can you create a package offering out of some of the work that you do?  Can you somehow incorporate a membership fee for your clients? (Most of Costco’s profits come from the annual membership fees…).  Do you have add-on services that you could translate to some kind of ongoing product?  Even if it turns out to be only 10% of your revenue, it can take a big edge off.

Do you currently have a good portion of your income as recurring revenue?  If not, when’s the last time you thought about it?  Why?

 

Embrace the Roller Coaster

The last thing to consider is the idea of embracing the roller coaster.  If you know that your business has a seasonal aspect to it… and there are busy periods and slow periods, it’s probably worth considering how you can structure your business to reduce the impacts of the ups and downs.  Can you staff to the slower periods and use temporary labor to help you through the busy periods?  Can you find off-season products or services that would help you manage during the slow periods (think snow removal for lawn and landscape companies)?

Is your business inevitably tied to seasonal impacts?  Are there any examples in your industry where they are overcoming that problem?  How about a different industry?  When’s the last time you tried to brainstorm ideas on how to manage this challenge – either from the cost side or the revenue side?

 

When the roller coaster is left to its own devices, you’ll find your company going through lots of painful stretches – too busy and not busy enough.  Not only is this difficult to handle financially, but it can also be rough on the employees – and taken to extremes it may end the ride altogether…!

Are you dealing with the roller coaster?  Did we miss any big ideas on how to manage it?  We would love to hear your thoughts in the comments below – let us know what you think.

Shawn Kinkade   Kansas City Business Coach

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